EXCLUSIVE: Former FTX Senior Counsel Assists US Authorities in Bankman-Fried Case

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Jan 5 (Reuters) – FTX’s former top lawyer Daniel Friedberg has cooperated with U.S. prosecutors in the investigation into the crypto firm’s collapse, a source familiar with the matter said, and founder Sam Benkman-Fried, who was arrested last month on felony fraud charges. put pressure .

Friedberg provided details about FTX at a Nov. 22 meeting with two dozen researchers, Fred said. The meeting, held at the U.S. Attorney’s office for the Southern District of New York, included officials from the Justice Department, the Federal Bureau of Investigation and the U.S. Securities and Exchange Commission, the source said. Reuters has seen emails between participants who scheduled appointments with those agencies.

At the meeting, he told prosecutors what he knew of Bankman-Fried’s use of client funds to finance his business empire, the source said. According to the source, Friedberg recounted conversations he had with other senior executives on the matter and provided details of how Alameda Research’s Bankman-Fried hedge fund operates.

Friedberg’s collaboration has not been previously reported. He has not been charged and has not been told he is under criminal investigation, the source said. Instead, he expects to be called as a government witness in Bankman-Fried’s October trial, the person said.

Friedberg’s attorney, Telemachus Kasulis, the FBI and FTX did not respond to requests for comment on his cooperation. The SEC, the Justice Department and a spokeswoman for Bankman-Fried declined to comment.

Bankman-Fried is accused of funneling billions of dollars in FTX client funds to Alameda for venture capital investments, luxury real estate purchases and political donations. He pleaded not guilty Tuesday in Manhattan federal court.

Manhattan U.S. Attorney Damian Williams, who is leading the criminal case against the now-bankrupt FTX, said last month: “If you were involved in misconduct at FTX or Alameda, now is the time to come out. “

Two of Bankman-Fried’s closest associates, former Alameda CEO Carolyn Ellison and former FTX CTO Gary Wang, pleaded guilty to fraud and agreed to cooperate. Ellison’s attorney did not respond to a request for comment. Wang’s lawyer declined to comment.

Meeting with the prosecutor

FTX filed for bankruptcy protection on November 11. A few days later, on November 14, Friedberg received a call from two FBI agents based in New York. He told them he was willing to share information but would have to ask FTX to waive his attorney-client privilege, according to a person familiar with the matter and the emails seen by Reuters.

Friedberg wrote to FTX the next day asking the company to waive his privilege so he could cooperate with prosecutors, according to an email seen by Reuters. FTX did not, but agreed with Friedberg about what he could disclose to investigators.

Friedberg then wrote to two FBI agents, telling them in an email reviewed by Reuters: “I want to cooperate in every way.”

The U.S. Attorney’s Office set up a meeting where Friedberg signed so-called offer letters prepared for him by the SEC and other agencies, according to the source and emails exchanged between the participants. Professional letters usually describe a possible settlement between authorities and individuals who are witnesses or the subject of an investigation.

“through thick and thin”

Prior to consulting FTX, Friedberg advised a mix of banking, fintech and online gaming companies.

One of his previous employers, a Canadian online gaming company called Excapsa Software, where he was general counsel, also drew controversy over a cheating scandal involving a poker site he ran under the name Ultimate Bet. A Canadian Gaming Commission fined Ultimate Bet $1.5 million in 2008 for failing to implement measures to prevent fraudulent activity. Excapsa has since been dissolved.

According to an audio recording available on the PokerNews website, Friedberg and some other Ultimate Bet associates discussed privately that year how to handle the scandal and minimize the amount owed to players. Friedberg previously told NBC News that the audio was recorded illegally, but the NBC article did not say Friedberg disputed its authenticity.

Friedberg was first represented as an outside attorney in 2017 while at US law firm Fenwick & West, where he headed its payment systems group, the source said. At the time, the source said, Friedberg advised Bankman-Fried on the Alameda office he founded that year.

In 2020, Friedberg came on board as FTX’s chief regulatory officer when Bankman-Fried launched a separate exchange for US clients, FTX.US.

In a blog post published on the FTX website that year, Bankman-Fried wrote that Friedberg had been FTX’s legal counsel “from the very beginning,” noting that he had “been with us through and through.”

Friedberg resigned Nov. 8, a day after Bankman-Fried disclosed to senior executives that FTX was nearly out of money, according to the source and three other people briefed on the negotiations, along with messages The text that his legal team had exchanged. Time.

Additional reporting by Hannah Lang; Edited by Megan Davis and Anna Driver

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